Saturday, 1 June 2019

Data gaps disincentive to oil giants -Amewu

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Adnan Adams Mohammed

The Minister of Energy, John Peter Amewu has disclosed that significant data gaps and low data quality are disincentives to attracting major oil giants in Ghana’s oil and gas bidding process.

The US oil giant, ExxonMobil and British Petroleum (BP) which had earlier submitted applications for direct negotiations for block 5&6, pulled out at the latter stage of the ongoing Licensing Bid Round. The Africa Center for Energy Policy (ACEP) charged the Ministry of Energy to undertake some serious introspection to find out why big companies like ExxonMobil and British Petroleum, (BP) pulled out of the competitive bidding process for the 3 oil blocks put on offer by the Government.

The Energy Minister, who agreed that the recent bidding process for some of the oil blocks in the Western Region has not been satisfactory, leveled the ‘blame’ on gaps in the legislative instruments as well as low quality of data on the blocks. The situation has pushed the Ministry to conduct a strategic legislative review for the oil and gas industry by bringing stakeholders and industry players seeking to examine the government's new policy to accelerate growth in the sector to help meet its target of one million barrels per day.

“Our basins are largely not de-risked, significant data gaps and low data quality still exists, and many companies continue to site our fiscal regime as disincentives. The recent results of Ghana’s first licensing round, although not satisfactory in terms of the response rate, has confirmed the fears about a developing industry and the risk associated with frontier areas,” Mr Amewu said.

The nonexistence of reliable data and low level of documentation on exploratory fields continue to have a negative impact on the quest by the government to bargain higher returns from global oil exploration companies.

He, therefore, urged the stakeholders to make input into the review process so that government can have a concrete strategy in attracting major oil and gas players into the country.

“As a government committed to private sector development, we are prepared to change course. We are determined to formulate and implement market-friendly policies to make Ghana competitive.” Adding that, this has become crucial due to the fact that, oil and gas projects have become very expensive with upstream investments is not increasing faster. Threat of the green revolution to the prospects of hydrocarbon-based economic development, have led oil producing nations, with Ghana as member, to reconsider their strategy for the accelerated growth of the oil and gas industry.

Ben Boakye, the Executive Director of ACEP speaking after the announcement of the two oil giants pulling out, last week cautioned that, if the necessary lessons are not learnt from this bidding exercise, future exercises might suffer. “I think we need to do some introspection, probably find out from the companies why all of a sudden they were not interested in competing for the oil blocks, so that it will inform our subsequent bidding rounds. Because if it happens like that the next rounds could be even more disappointing, because then you may not even have interest in the blocks.”

The government, through the Energy Ministry, earmarked six oil blocks for exploration. Three of the blocks; 2, 3 and 4-were to go through a competitive bidding process while two blocks-5 and 6-were supposed to be for direct negotiations. One of the blocks was reserved for Ghana National Petroleum Corporation (GNPC).

Chief Director at the Ministry of Energy, Lawrence Apaalse told the press that the Ministry received information from the two companies, requesting direct negotiations for blocks 5 and 6 that they were no longer interested in the blocks.

Meanwhile, ENI and Vitol, as well as Tullow Ghana Limited, submitted bids for block 3 with First E&P submitting a bid for block 2.

However, there was no bid for block 4. Interestingly, the ministry received about sixteen applications for direct negotiations.

The original pool of companies that put in a bid for the 3 oil blocks include China National Offshore Oil Corporation (CNOOC), Cairn Energy, Qatar Petroleum, Global Petroleum Group, First E&P, Sasol, Equinor and Harmony Oil and Gas Corporation.

The rest include ExxonMobil, British Petroleum, Tullow Ghana Limited, Total, ENI Ghana, Vitol, Kosmos Energy and Aker Energy.

Out of the 14 companies that were prequalified to bid for the 3 blocks put up on offer, only Tullow Oil, ENI and Vitol as well as First E and P submitted bids.

Mr. Boakye also urged relevant stakeholders to question why a large number of companies (16) rather applied for direct negotiation for the opportunity to explore blocks 5 and/or 6 in Ghana’s offshore oil area.

“What signal does the high interest in direct negotiation send?. In the coming days we have to really dig deeper to find out why the companies want to explore the direct negotiation option. Is it because that side of the equation is weak and therefore everybody wants to exploit or because there are some constraints built into the competitive tendering process that wards the companies off? So we have to dive deeper into the two-pronged approaches to learn and make our competitive tendering process better.”

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